The Returns to Hedge Fund Activism

The Returns to Hedge Fund Activism

Alon Brav, Wei Jiang, Frank Partnoy, Randall Thomas

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March 01 2008

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  • hedge fund • 
  • Activism • 
  • governance

Hedge fund activism is a new form of arbitrage. Using a large hand-collected data set from 2001 to 2006 we find that activist hedge funds in the U.S. propose strategic, operational, and financial remedies and attain success or partial success in two-thirds of the cases.

The abnormal stock return upon announcement of activism is approximately seven percent, with no reversal during the subsequent year. Target firms experience increases in payout, operating performance, and higher CEO turnover after activism. We also find large positive abnormal return to the self-reported hedge fund activists during our sample period. The abnormal return significantly exceeds the returns to all hedge funds, the returns to equity-oriented hedge funds and is robust to alternative risk adjustments and selection biases.


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Emory University Goizueta Business School
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Vanderbilt University Law School and Owen School of Management